It never rains but pours and that was never more true for the payday loans industry this week.
On Monday last week there was some positive news with the launch of an enhanced Code of Practice drawn up by four trade associations representing 90 per cent of the payday loans sector.
The terms of the charter commit lenders to a series of obligations including clear information on loans, sound affordability assessments and notify customers three days in advance of recovering payments.
But that did little to stem the tide of bad headlines that resulted from the House of Lords debate on Wednesday.
Members of the House of Lords were clearly passionate about the matter with Bishop Justin Welby, the next archbishop of Canterbury, coming up with some of the best lines of the debate, describing the sector as “clearly usurious” and “a moral case” that is “bad for the clients and bad for all of us in this country when it is permitted to happen”.
For any industry, when you have the head of the Church of England warning his flock and damning a practice as usury, you know you’re in trouble.
So Mortgage Strategy’s cover this week is apt with payday loans pictured as the black sheep of UK financial services industry.
Thanks to the actions in the House of Lords last week hopefully there will be a material change as a result, with the Financial Conduct Authority now able to cap the cost and duration of credit for short-term loans.
The FSA has a bad track record when it comes to cracking down on rogue areas of the market many in the industry have been arguing are a problem years in advance – think of sale-and-rent-back.
As commercial secretary Lord Sassoon put it last week, hopefully the amendment to Financial Services Bill will ensure it “grasps the nettle” on payday loans.